US jobless claims near all-time low. Fed's balance sheet tops out. Japan's machinery orders strong. China yuan appreciating. Aussie jobs stutter.
Kia ora,
Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the International edition from Interest.co.nz.
Today we lead with news that although the Russia-Ukraine headlines dominate the general news, the global economy is continuing its recovery, one which is supercharging commodity demand.
Last week's American jobless claims rose marginally to 238,000 for the 7 days, taking the total number of people on these benefits to 1.975 mln and below pre-pandemic levels because more people found jobs or their benefits expired. The seasonally-adjusted level is near an all-time low.
Labour shortages, cold weather and timber shortages have all meant that US housing starts fell in January, and that was not expected. But building permits rose and to their highest level since 2004. They want to build but supply chain issues are holding them back.
The Philly Fed's wide-watched factory survey in the powerhouse Pennsylvania manufacturing heartland suggests the same supply-chain issues. Strong order levels eased a bit, but labour availability remains very tight. These firms now report that they are successfully passing on the higher costs they face.
And we should note that although its growth has flattened out over the past month, the US Fed's balance sheet is still inching up, now almost at US$8.9 tln, essentially built up over the past two years to be 37% of annual US GDP. The March Fed meeting is expected to cap that, and start reducing it.
Japan has reported some very encouraging machinery orders in December, up +5.1% year-on-year and +3.6% of that in December alone. This data confirms the strong machine tool order data we had earlier. They need their capital goods sector to fire because imports are rising sharply (especially oil).
In China, their currency is appreciating against the USD, now at ¥6.33 to the greenback. But it still has some way to go to reach the ¥6.06 level it was at in 2013. Interestingly, the yuan is still only used in 2.3% of all international trade, although that is up from 2.1% two years ago. Of course, use of their currency in trade settlements is one thing; the real indicator is what the underlying transactions are priced in, and there the USD remains supreme.
The aluminium price has powered to a new record high yesterday, US$3307/tonne (NZ$4935), up +18% since the start of the year.
Australia added +13,000 new jobs in January when none were expected, but it actually isn't great news. That is because it lost -17,000 full time jobs and gained +30,000 part-time jobs. Their jobless rate stayed at 4.2%. The switch to part-time jobs helps explain that hours worked fell by almost -9% between December 2021 and January 2022. Rising sick leave is also being cited. But looking past the detail, it is clear that Omicron did not really affect their labour market that much in January, overall.
The UST 10yr yield opens today at 1.98% and down -6 bps from this time yesterday.
The price of gold starts today at US$1897/oz and up another +US$32 from this time yesterday. For the week so far, gold is up +3% and a 35 week high.
And oil prices are down -US$3 to just on US$90/bbl in the US, while the international Brent price is just under US$91.50/bbl.
The Kiwi dollar will open today ¼c firmer at 67 USc. Against the Australian dollar we up at 93.1 AUc. Against the euro we are firmer at 58.9 euro cents. That means our TWI-5 starts today at just on 71.3 and +20 bps firmer.
The bitcoin price is down -3.4% since this time yesterday and now at US$42,114. Volatility over the past 24 hours has high at +/- 3.2%.
You can find links to the articles mentioned today in our show notes.
And get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston and we’ll do this again on Monday.